After Pandit, a smaller Citi could get smaller yet
NEW YORK (AP) — The incredible shrinking bank may have to shrink more.
In the hours after Tuesday’s surprise announcement that Citigroup CEO Vikram Pandit was stepping down, speculation was rife, and facts scant, about what lay ahead for the nation’s third-largest bank.
Pandit left after a series of embarrassments and missteps that apparently unsettled Citigroup’s board, including a “no” vote from shareholders on his pay package and a ruling from the Federal Reserve that the bank was not strong enough to raise its stock dividend.
Under his successor, one possibility given high odds by financial analysts is a strategy of more cost-cutting, more shrinking and more focus on boring, traditional banking, like making loans.
In the nearly five years since Pandit took over as CEO, he shed businesses and cut jobs. Staff fell from 375,000 when he took over to 262,000.
Citi’s new CEO is Michael Corbat, 52. He had been the CEO of Citigroup’s Europe, Middle East and Africa division. He also ran Citi Holdings, which contains assets that Citi wants to sell.
Because Corbat isn’t widely known, analysts Tuesday were not sure how he might change the direction of the company.
For clues, some are looking to someone more well-known: the man thought to be behind Pandit’s departure, Citi Chairman Michael O'Neill. O’Neill became chairman in March, when Richard Parsons left after three years.
O’Neill was elected CEO of Barclays, the British bank, in 1999 but had to give up the job immediately because of heart problems. He joined Citi’s board in March 2009. O’Neill had also been CEO of Bank of Hawaii Corp., where he was a big cost-cutter.
“When he ran Bank of Hawaii, he shut down up to 50 percent of its branches. It’s a startling number,” said Cassidy. He added that at Citi, “if the branch banking businesses doesn’t make sense in parts of the United States, (he’ll) get rid of it.”
“O’Neill downsized tremendously, and that’s what I think you’ll see here,” he said.
For years, the goal in banking was to get bigger, spreading expenses over more and more customers and offering a smorgasbord of services. This was the vision of Sandy Weill, the former Citi CEO who built the bank through several deals.